Why You Should Add Shake Shack (SHAK) to Your Portfolio Now
Shake Shack Inc. SHAK has experienced a remarkable rally, surging an impressive 81.8% year to date, surpassing the industry's 9.6% growth. Notably, the stock has outperformed major stock market indexes, including the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite, which recorded 13.8%, 25.1% and 44.2% growth, respectively.
The company’s 2024 earnings and sales are likely to witness 37.8% and 15.1% jump year over year, respectively. In the past 60 days, earnings estimates for 2024 have witnessed upward revisions of 27% to 47 cents per share, giving an indication that investors are optimistic about its earnings growth. Moreover, its earnings have surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average beat being 80.8%.
The stock carries a Zacks Rank #2 (Buy) and has a Growth Score of A at present. The Growth Style Score condenses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 (Strong Buy) or 2 and a Growth Score of A or B offer solid investment opportunities.
Growth Drivers
Shake Shack is committed to strategizing its expansion plans effectively. In fiscal 2023, it expects to add approximately 80 units of system-wide Shack, suggesting an uptick from the prior expectation of 75 units. It projects to launch approximately 40 company-operated openings during fiscal 2024. Approximately 40 licensed Shack openings are also suggested.
Since the first opening of drive-thrus in 2021, it has opened 21 company-operated drive-thrus. The company emphasized consideration of new countries, territories and formats to drive growth over the long term. In June 2023, SHAK also opened its first licensed drive-thru in Dubai. Management expects to open new stores in Malaysia (2024) through a new development agreement.
SHAK continues to impress investors with robust global same-shack sales growth. The metric increased 10.3%, 10.1%, 6.3% and 10.3% in the first, second, third and fourth quarters of fiscal 2022, respectively.
During the first, second and third quarters of fiscal 2023, the measure improved 10.3%, 3% and 2.3%, respectively, year over year. In the fiscal fourth quarter, same-shack sales are estimated to grow by low single digits year over year. For 2023, our model predicts the metric to rise 4.8% year over year.
SHAK has been investing in digital transformation, which is crucial to its growth. Digital sales continue to impress investors. Its current digital sales are approximately 30% of its business. The company has been making more investments in digitization in an effort to sustain its digital guest enhancement strategies in the near term.
Earlier, management stated that its main focus for digital investment was to improve the Kiosk experience through greater omnichannel adoption and long-term guest connection, with all new features and offers made available on the platform. These updates are expected to enhance guest experience and convenience, resulting in higher average checks.
Other Key Picks
Below, we have presented some other top-ranked stocks from the Zacks Retail-Wholesale sector.
Arcos Dorados Holdings Inc. ARCO sports a Zacks Rank #1 at present. It has a trailing four-quarter earnings surprise of 28.3%, on average. Shares of ARCO have jumped 55.9% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ARCO’s 2024 sales and earnings per share (EPS) indicates 10.6% and 15.5% growth, respectively, from the year-ago levels.
Brinker International, Inc. EAT flaunts a Zacks Rank #1 at present. It has a trailing four-quarter earnings surprise of 223.6%, on average. Shares of EAT have gained 38.9% in the past year.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS implies 5.1% and 26.2% growth, respectively, from the year-earlier levels.
Wingstop Inc. WING sports a Zacks Rank #1 at present. It has a trailing four-quarter earnings surprise of 28.9%, on average. The stock has gained 83.6% in the past year.
The Zacks Consensus Estimate for WING’s 2024 sales and EPS suggests 15.8% and 18.2% growth, respectively, from the prior-year levels.
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Brinker International, Inc. (EAT) : Free Stock Analysis Report
Arcos Dorados Holdings Inc. (ARCO) : Free Stock Analysis Report
Shake Shack, Inc. (SHAK) : Free Stock Analysis Report
Wingstop Inc. (WING) : Free Stock Analysis Report
